How Many Students Use Loans to Pay for College

By Victoria Holliday | Published on March 24, 2025

A mathematics lecture in progress with students seated

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The rising cost of higher education has made paying for college an immense challenge for many students and their families. As tuition, fees, and living expenses continue to climb, more and more students turn to loans to help bridge the financial gap. Whether from federal or private lenders, taking out student loans has almost become a default part of higher education.

According to research from U.S. News, in 2022, 61% of graduates had borrowed funds for school. The reality is that utilizing some form of loan is often necessary to make the dream of higher education attainable. If you find yourself in this position, know that you are far from alone in relying on borrowed funds to invest in your academic future.

Paying for college: What percent of students take out loans?

A significant portion of students rely on loans to fund their college education. Each year, approximately 30 to 40% of undergraduate students take out federal student loans. Those who attended private colleges were more likely to have borrowed compared to those at public institutions. Overall, around 65% of bachelor’s degree recipients utilized student loans to help cover costs during their time in college. This percentage is even higher, around 75%, among graduates from private 4-year schools.

The reliance on loans is not surprising considering that average fees and tuition at public four-year schools have more than doubled over the past 30 years.

At private non-profit four-year colleges,13% of students have private loans, and 52% have federal loans. At public four-year colleges, 9% of students had private loans, and 49% have federal loans.

A table showing the average loan balance for public four-year college students.

Private 4-year school loan comparison: 52% of students borrow federal loans with an average balance of $22,200; 13% borrow private loans with an average balance of $44,600.

Average student loan debt amount upon graduation
According to the Department of Education, as of 2023, the average student loan debt for federal loans was about $38,290 per borrower.

Federal vs Private Student Loans

When it comes to loan options, there are two different types of loans: federal student loans and private student loans. Each has distinct differences. Federal student loans are provided by the government, while private loans come from banks, credit unions, and other private lenders¹.

Federal loans offer fixed interest rates and also provide borrower protections like income-driven repayment plans and student loan forgiveness programs.

Private student loans are essentially like any other consumer loan from a bank. Interest rates can be variable, and are based on your creditworthiness. Private lenders set their own terms regarding repayment, deferment, and loan cancellation policies which vary.

Private loans with Earnest*

As a private lender, Earnest provides borrowers with a range of options and benefits to help you have control of your loans.
Earnest offers some of the best interest rates around for student loans. Checking your rate won’t hurt your credit score and will help give you an accurate picture of what it could cost you to borrow a loan independently.

About the Author

Victoria Holliday

Victoria is the Head of Content at Earnest. She brings extensive ed-tech expertise from six years at Chegg, where she developed educational resources reaching over 20 million students nationwide. With a Master’s in Political Science and experience in public policy from several California campaigns, she’s passionate about creating accessible content that enhances student outcomes in the dynamic world of higher education.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.
*Earnest private student loans are funded by FinWise Bank, Member FDIC, or One American Bank, member FDIC

¹ Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if your struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.gov/.